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Bull of the Day: Sysco Corporation (SYY)

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Sysco Corporation (SYY - Free Report) is a wholesale food and foodservice powerhouse that services an array of industries. The company boasts a strong history of top and bottom-line growth that was only really disrupted by covid.

Sysco topped our quarterly estimates in May and raised its guidance in the face of inflation and recession worries, even as many companies across an array of sectors cut their outlooks. Sysco also managed to hit new highs in 2022 and it’s part of a select group of Dividend Aristocrats.

Supplying a Vital & Diverse Industry  

Sysco is a wholesale food products company that services an array of industries. The firm is nearly recession-proof considering that its clients include almost anyone who “prepare meals away from home.” Sysco’s clients operate in industries such as restaurants, healthcare, education, hotels, and beyond.

Sysco guarantees its clients access to what it calls the “industry’s best distribution network” to help keep customers “on trend and stocked with fresh products and fresh ideas.” Sysco’s product categories on the food side include meat & poultry, seafood, produce, dairy, bakery & desserts, pantry staples, beverages, and specialty & ethnic.

Sysco also sells foodservice offerings such as paper goods, equipment, supplies, and more. Alongside its food and product segments, Sysco operates a wide-ranging services unit that includes offerings like training materials, food cost advantages, menu and recipe ideas, and beyond. Overall, Sysco operates roughly 350 distribution facilities worldwide to help serve over 650k customer locations.

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Growth & Outlook

Sysco caters to the food-away-from-home market that’s massive and nearly indestructible. In fact, the only time Sysco’s sales have declined at any point in the past 25 years was a tiny 1.8% dip in fiscal 2009 and slightly larger pullbacks during covid when many offices, schools, restaurants, and other in-person businesses and intuitions closed entirely.

SYY’s fiscal 2021 revenue (for the period ended on July 3, 2021) slipped 3%, after its FY20 revenue dropped 12%. As people began to return to their normal lives, Sysco’s sales rebounded in a big way. The firm topped our Q3 FY22 earnings and revenue estimates in early May. The company’s Q3 sales climbed 43% YoY and were up 15% from the pre-covid period in 2019. Its U.S. foodservice revenue was up 19% versus the same period in fiscal 2019.

Sysco raised its guidance at the time despite inflation headwinds, with it able to pass on its higher costs and steer clients toward items and categories that have not been impacted as much by inflation. The company also grew its market share last quarter. Sysco’s Zacks consensus EPS estimate for FY22 is up over 6% since the report, with FY23 5% higher.  

Zacks estimates call for Sysco’s FY22 revenue to climb over 32% to roughly $68 billion to blow away its pre-covid total in 2019 of $60 billion. The firm’s sales are then projected to jump another 8.4% in FY23 to around $74 billion. Meanwhile, its adjusted earnings are expected to climb 124% to $3.23 a share this year and another 34% in FY23 to reach $4.32 per share.

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Wrapping Up

Sysco stock is up 75% in the last five years to top its industry’s 35% and outpace the S&P 500’s 65% climb. SYY shares have also matched the broad benchmark index during the past decade, while nearly doubling its industry. Plus, the stock has held up really well even as the benchmark fell into a bear market, with SYY up 13% in the last 12 months and 8% in 2022. The stock closed regular trading Wednesday at around $85 per share, or about 6% off its April peaks.

Despite its strong performance recently and over the past 10 years, SYY is now trading right at its decade-long median at 19.7X forward 12-month earnings. This also represents a 40% discount to its covid highs and just a slight premium compared to its industry.

Sysco’s positive earnings revisions help it land a Zacks Rank #1 (Strong Buy) and it’s part of a space that’s in the top 25% of over 250 Zacks industries. And eight of the 11 brokerage recommendations Zacks has are “Strong Buys.”

Plus, Sysco is part of a small group of so-called Dividend Aristocrats, which are S&P 500 companies that have both paid and raised dividends for at least 25 straight years. SYY’s dividend yield comes in at 2.3% at the moment. Most importantly, Sysco appears as though it’s a stock poised to outperform amid the ongoing market turbulence and global recession worries.


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